For the last three years, our message to the current administration has been that to change the status quo and achieve the desired accountability and service delivery in the province, it needs to focus on four key areas, namely:

• implementing effective preventative controls
• strengthening the state of financial health
• effective project planning and management
• compliance with legislation, especially as it relates to procurement and consequences.

Overview

While provincial leadership committed to work on these critical areas in the previous year, the slow response to honouring these commitments led to stagnant audit outcomes and gaps in service delivery. A culture of not doing things right persisted due to a lack of leadership commitment to establish a strong control environment and enforce accountability.

Audit outcomes in the province have continued to fluctuate, while remaining stagnant overall over the current administration term. This was largely because provincial leadership failed to ensure that management and other parties in the accountability ecosystem, such as internal auditors and audit committees, effectively addressed the warning signals that we reported in prior years and that auditees institutionalised strong financial management and reporting internal controls. Consequently, auditees continue to produce poor-quality financial statements, with only six auditees (38%) submitting credible financial statements for auditing. Auditees also continue to rely on the audit process to identify and correct misstatements, with five auditees (31%) receiving unqualified audit opinions only because we allowed them to correct misstatements we identified in their submitted financial statements. Three of these auditees were key service delivery departments (health, education, and public works, roads and transport) that, together, are responsible for 80% (R45 billion) of the provincial budget.

We would like to commend both the Mpumalanga Tourism and Parks Agency, which improved from an unqualified opinion with findings to a clean audit, and the Mpumalanga Economic Growth Agency, which received an unqualified opinion with findings after having received a modified opinion since its inception in 2010-11. Both these auditees were able to address significant deficiencies in their internal controls. At the Mpumalanga Tourism and Parks Agency, the newly appointed chief financial officer implemented strong monitoring controls over financial, performance and compliance areas, while the improvement at the Mpumalanga Economic Growth Agency was mainly due to better record keeping for loan agreements. The provincial treasury was unable to maintain its clean audit status and regressed to an unqualified opinion with findings due to material non-compliance findings relating to supply chain management. The Mpumalanga Regional Training Trust regressed from an unqualified to a qualified opinion because management did not design and implement a credible action plan as well as instability in the position of the chief executive officer.

Persistent weak financial management and budgeting controls led to the financial health status of auditees in the province deteriorating, which negatively affected their ability to deliver services. Departments and entities continued to spend money that they did not have, and seven auditees had a combined R1,5 billion deficit. The departments also disclosed a total of R11,6 billion in legal action against the state. The provincial health department was responsible for R10,2 billion of this amount (88%), mainly due to medical negligence claims. This is not surprising given the surge in nursing, medical and clinical vacancies, made worse by the budget cuts. When these claims are settled, it is with funds earmarked for service delivery. The provincial education department is struggling with good financial management, as can be seen from negative financial indicators such as an overdraft of R90 million, an accrual-adjusted net deficit of R129 million and unauthorised expenditure of R130,9 million. This department is expected to use 25% of its 2022-23 budget to fund the 2021-22 cash shortfall, which negatively affects its ability to meet future service delivery needs. The Mpumalanga Regional Training Trust experienced serious liquidity and cash flow challenges, which caused it to use funding that was earmarked for strategic objectives such as establishing the Mpumalanga Innovation and Skills Hub to fund its own operations. As a result, the public entity reported financial sustainability issues in its financial statements. These financial woes are typical examples of service delivery being compromised due to accountability failures.

Revenue-generating departments, such as the provincial community safety, security and liaison department, and public entities, such as the Mpumalanga Economic Growth Agency and the Mpumalanga Tourism and Parks Agency, are not optimising their role to increase revenue for the province. The department struggled to properly account for generated revenue and thus continues to be qualified on this aspect year after year, while the entities operated at a deficit. These auditees continue to rely on grants from the state when they could be self-sufficient.

Weaknesses in financial and project management controls continue to negatively affect the delivery of infrastructure projects in the province. The provincial public works, roads and transport department is responsible for procuring and implementing infrastructure projects, and is thus central to the province’s project management failures. The department struggled to ensure that its project management unit was capable of monitoring and overseeing infrastructure projects and continued to rely heavily on consultants to perform this function without scrutinising their work. The department’s failures continued to cause glaring project management deficiencies and non-compliance with supply chain management legislation, which resulted in irregular expenditure. Consequently, the department ranked as the highest contributor to irregular expenditure, incurring R1,02 billion (38%) of the total irregular expenditure in the province in 2021-22. We remain concerned about this department overpaying contractors for work that is not done, as this takes away funds that could have been used for other service delivery initiatives, and we have issued two material irregularities in this regard. Ultimately, these failures negatively affect the timely and cost-effective delivery of the infrastructure that is needed for service delivery. Provincial government urgently needs to build internal capacity and not rely so much on consultants.

Although the overall quality of performance reporting improved, with only three of the province’s 16 auditees having material findings compared to six in the previous year, this does not tell the full story. Auditees do not always have indicators for all of the critical needs (lived realities) of people in the province, and in some cases did not include mandatory Medium-Term Strategic Framework indicators in their annual performance plans, meaning that resources are not planned for these needs. And while some auditees did include all relevant key indicators in their annual performance plans, they underperformed substantially on the targets set. For example, the provincial health department did not include indicators relating to human resource needs and filling critical posts despite its struggle with staffing issues, which causes long queues and deprives people in the province of the best possible patient care. It also only achieved 37% of its planned targets. This level of performance could actually be lower due to the material findings raised on the district health services programme, which is one of the department’s core mandates as it relates to comprehensive primary healthcare services. The provincial education department excluded some mandatory Medium-Term Strategic Framework indicators from its annual performance plan; when such critical priorities are not tracked, the quality of education is negatively affected. It also achieved only 73% of its targets relating to the public ordinary schools programme, despite overspending on the programme budget. This affected critical priorities such as placing teachers, which left some schools operating with skeleton staff and overcrowded classes. At the Mpumalanga Tourism and Parks Agency, one of the indicators that plays a key role in biodiversity is the Management Effectiveness Tracking Tool score. The target for 2021-22 was for 40% of the sites to receive a score of at least 67%; however, not one nature reserve achieved this score. One of the aspects that affects the score is road infrastructure, and the bad state of roads leading to key tourist attractions negatively affected the tourism and tourism-related businesses in the province. The provincial human settlements department had an indicator relating to the enrolment of houses with the National Home Builders Registration Council targeted at 3 266, but only enrolled 1 697. This underachievement created a backlog in service delivery.

Some indicators are also not output driven and therefore not aimed at driving service delivery, or do not focus on the right priorities. For example, the provincial public works department reported that it had achieved the indicator for scholar transport, which focused on the number of routes monitored and not on the safety of the learners. During our audit, we found buses that were operating with expired licences and drivers who did not have driver’s licences, which endangers the safety of learners. The department is not implementing any consequences for such transgressions. The departments and entities in the province need to enhance their planning process and focus on identifying priorities to ensure credible, good-quality annual performance plans.

Information technology controls in provincial departments regressed in 2021-22 and there were still challenges in ensuring effective controls for information technology governance, user access management and security management. This compromised the financial and performance management systems used to produce financial and performance information and to meet service delivery objectives. The provincial health department decided to invest in a queue management system at five hospital facilities – a good initiative that is meant to respond to the long patient waiting times. However, due to deficiencies in information technology governance controls (lack of oversight by the information technology steering committee) and project management failures (no feasibility analysis study and no clear project owner), only two hospitals ended up partially using the system.

Weak control environments and a lack of consequences have created a culture of impunity and a blatant disregard for the rule of law, especially when it comes to procurement. As a result, nearly all (98%) of the province’s R2,7 billion in irregular expenditure related to supply chain management. Auditees also have a poor track record when it comes to dealing with irregular expenditure swiftly and ensuring accountability, with a total of R7 billion in prior year irregular expenditure not yet having been dealt with.

Since phasing in our expanded powers four years ago, we have implemented the material irregularity process at 10 auditees in the province. By 31 August 2022, we had notified accounting officers and authorities of 10 material irregularities with a combined estimated financial loss of R458 million. In 2021-22, we notified the accounting officers or authorities of four auditees (provincial departments of education, and public works, roads and transport; Mpumalanga Regional Training Trust; Mpumalanga Economic Growth Agency) of a total of seven material irregularities with a combined estimated financial loss of R348 million. These material irregularities were due to weaknesses in financial management controls, such as reconciliations of source information, reviews of payments to suppliers, and strict implementation of debt management policies. Accounting officers and authorities are taking appropriate action (such as implementing controls to prevent further losses and reporting the matters to relevant authorities for investigation) to address three of the 10 material irregularities, and we find the response of the Mpumalanga Economic Growth Agency particularly encouraging. Through diligent and decisive actions, the agency was able to resolve a material irregularity on non-adherence to its debt management policy. Leadership within the province is responsive to the matters raised as material irregularities; however, this responsiveness is not always adequate or sufficiently supported by credible information to allow for the swift conclusion of the actions taken or planned.

Overall, we found that the various roleplayers in the accountability ecosystem, including the coordinating ministries, were not effective in their roles. The coordinating ministries set input-based indicators rather than impact-based ones for their interventions and support roles. And, in some instances, the ministries did not include indicators that measure the interventions and support in their annual performance plans. We engaged the leadership of the coordinating ministries on the quality and completeness of indicators with the sole aim of influencing them to play their role effectively to bring tangible improvements in provincial administration.

In response to the 2021-22 audit outcomes, members of the executive councils of various departments, the premier and the speaker of the legislature made commitments to improve audit outcomes by developing and implementing effective action plans, and by implementing our recommendations. Accounting officers made specific commitments to the premier, including the following:

• Increase clean audits to six provincial departments (social development; economic development and tourism; human settlements; sports, arts and culture; health; and the premier’s office).
• Build internal capacity as a permanent solution to address project management issues affecting the quality and timeliness of service delivery.
• Closely monitor performance against targets, especially at the provincial departments of education and health.
• Ensure that audit action plans are developed and shared with the premier’s office so that the office can monitor how these action plans are implemented.

Furthermore, the speaker committed to the following:

• Departments and public entities (assisted by the provincial treasury) will be requested to draft internal control turnaround strategies, including plans to improve the state of financial health, and to submit quarterly progress reports to the portfolio committees.
• Portfolio committees will increase the number of planned oversight visits to projects (in progress and completed) to check the amount paid against the stages of completion and the quality of workmanship on these projects.
• Departments and entities will be expected to submit progress reports to the legislature on the implementation of house resolutions emanating from annual reports (audit outcomes) with appropriate evidence.
• Portfolio committees will develop a mechanism to ensure that the non-implementation of house resolutions is addressed.

We will follow up on the province’s progress in implementing these commitments in the next audit cycle.

Call to action

We call upon all roleplayers in the accountability ecosystem to play their roles effectively and work together to implement sustainable solutions that will address the four critical areas highlighted in our yearly messages. Only then will we see a public sector culture shift towards increased accountability for government spending and improved lived experiences for the people in the province.